Wednesday, 16 December 2015

This is one of
those days when the eyes of most economic commentators will be fixed on what
the United States Federal Reserve decides to do to the interest rate rather
than the latest UK job market figures. The Office for National Statistics (ONS)
data, mostly covering the three months August to October 2015, nonetheless
provide another twist in the tale of the labour market trend on this side of
the Atlantic.

After a brief
hiatus in the spring, the UK jobs boom is clearly back in full swing with (according
to the household Labour Force Survey) 207,000 (+0.7%) more people in work
compared with the previous quarter and 505,000 (+1.6%) more than a year
earlier. On an annual basis employment of employees increased in percentage
terms by 1.9%, somewhat more than self-employment 1.6%. Within these totals, in
percentage terms part-time employment (+2%) increased by more than full-time
employment (1.5%). At the sector level, construction recorded by far the largest
annual increase in jobs (+111,000 or 5.3%) in a big employment sector.

The ONS’s alternative
quarterly Workforce Jobs series, mostly based on a survey of employers, offers a
slightly different but broadly consistent picture of job growth of 1.2% in the
year to September 2015. The ONS also finds that in the year to September
private sector employment increased by 2.2% while public sector employment fell
by 1.1%.

The rise in LFS
employment takes the total number in work to 31.30 million and the working age
employment rate to 73.9%. Both the latter are new records but less noteworthy
this month than two other landmark figures. First, total hours worked each week
in the economy have topped 1 billion for the first time ever. Second, unemployment
has at last returned to the pre-recession rate of 5.2%. Yet after a period of
much better news on pay, the rate of average regular weekly wage growth (i.e.
excluding bonuses) for employees has fallen sharply to just 2% in the year to
October, down from 2.4% in the year to September. The slowdown is particularly
marked in the private sector (down from 2.8% to 2.3%), the rate in the public
sector actually rising slightly (up from 1.2% to 1.3%). The
ONS notes that the drop in the overall figure reflects a high single month
growth rate for July of 2.9% falling out of the latest three month average and
being replaced by a much lower single month growth rate of 1.7% for October.

There is thus a
palpable sense of what a punster might call ‘payja vu’ in the UK labour market
at present, a reminder of the initial phase of the economic recovery characterized
by a jobs boom alongside weak productivity and pay growth. What’s most
surprising it that for all the talk of mounting skills shortages employers in
most sectors (with the exception of construction where very strong job growth
has pushed wage growth well above 6%) appear perfectly capable of hiring at
will without having to hike pay rates. This will please jobseekers and Bank of
England interest rate setters even though it means employees are now enjoying
real wage gains only because almost zero consumer price inflation is nowhere
near the Monetary Policy Committee’s target rate of 2%.